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Edward Jordan: Investment real estate – A 2018 forecast

While record-high selling prices in major metropolitan markets are a real estate trend that stands to continue from ... have drawn multifamily investors to southwestern Connecticut and the lower Hudson Valley. Likewise, as residential and commercial ...

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While record-high selling prices in major metropolitan markets are a real estate trend that stands to continue from 2016 and 2017 into 2018, rising retail vacancy rates is the most significant change facing real estate investors todayAs investors look for opportunities in secondary and tertiary markets, understanding the shifting dynamics of the various asset types in Fairfield County and Hudson Valley markets is key. THE FATE OF RETAIL The U.Sis experiencing a fundamental shift in the way consumers shop, which is driving closures among brick-and mortar retailIn an effort to increase occupancy and maintain relevance, many traditional shopping malls are also embracing experiential and lifestyle concepts, welcoming health clubs and sports facilities, for example, into their complex. CoStar reports the national retail vacancy rate rose an additional 10 basis points in the second quarter of 2017, coming in at 5.2 percent for the third quarterAn illustration of the rising retail vacancy trend, 101 million square feet of retail store closings were announced this year aloneFurther, October survey data released by Deloitte revealed the recent holiday season was the first where shoppers spent more of their holiday budgets online than in brick-and-mortar retail. While some vacant retail assets will find new life as mixed-use or office properties and others have been converted into logistics centers to fulfill online shopping orders, the current state of retail reflects the first time in a number of years that all retail, from Class A to Class C, is facing downward market pressureAnd that even includes iconic retail and shopping destinations such as Manhattan’s Fifth Avenue and Boston’s Newbury StreetOf note, Lord & Taylor’s Fifth Avenue store in Manhattan is even reducing its footprint and part of its building will soon house WeWork’s headquartersIn Manhattan alone, retail rents are reported to have hit a 17- year low. THE 2017-18 MULTIFAMILY MARKET In recent years, record-high building values in major metropolitan markets such as Boston and New York have driven real estate investors to seek opportunities in neighboring secondary marketsAmple inventory of existing Class B and Class C assets, together with conversion of vacant commercial and office properties into apartments, have drawn multifamily investors to southwestern Connecticut and the lower Hudson ValleyLikewise, as residential and commercial tenants have set down roots in Westchester, Orange and the lower Hudson Valley, multifamily properties in close proximity to highways and public transportation have been able to maintain strong occupancy rates and rent growthAs such, values and capitalization rates for multifamily assets remain aggressive. INFLUX OF NEW INVENTORY LEADS TO SOFTENING IN CLASS A MARKET As high volumes of new Class A inventory come to market at this late stage of the current cycle, developers increasingly have to offer leasing incentives to lease up new properties to a stabilized occupancy rate. For example, in the New Haven submarket, 600 new Class A apartments came to market in 2015, followed by an additional 200 units in 2016, with 500 more units still in the pipeline to be deliveredConsequently, we are seeing a 15 percent Class A multifamily vacancy rate in this market, compared to a historic average of under 4 percent. Much like New Haven, the Stamford submarket finds itself with an influx of Class A multifamily inventory, high vacancy rates and below-average rent growthStamford recently ranked in the bottom 20 for submarkets across the U.Sfor rent growth, falling below the national average. These Class A market trends are expected to not only continue into 2018, but to be compounded by an uptick in homeownership rates, following a decade of declines, as Class A multifamily has to compete with first-time millennial homebuyers. OFFICE BUILDINGS IN FAIRFIELD COUNTY AND THE HUDSON VALLEY Local leasing agents report 52 percent of Westchester’s office activity was concentrated in White Plains during the second quarter this yearAs companies increasingly abandon sprawling suburban campuses for more dynamic urban cores, vacancy rates in area cities stand to decline while neighboring suburban communities could face declining occupancy ratesFor the value-add investor, however, these underutilized properties often present an opportunity to buy existing assets for prices below new construction and reposition for higher and better use to generate outsized returnsWhile experts had predicted a bounce back in the suburban office market earlier in the current cycle, job growth hasn’t reached the levels required to fuel heightened demand. With a new national tax plan enacted, imminent change is coming to the investment real estate landscapeAs always, understanding the market dynamics and identifying properties with value-add potential remain key to executing a successful investment real estate plan. Edward Jordan is the founder and managing director of Northeast Private Client Group, an investment real estate firm with offices in White Plains and SheltonHe can be reached at var bannersnack_embed = {"hash":"bx907fsau","width":728,"height":90,"t":1488029628,"userId":27676241,"responsive":true,"type":"html5"}; TAGSEdward JordanReal Estate Previous articleAndi Gray: Where will we be tomorrow?Next articleWestchester’s Department of Senior Programs issues three RFPs Edward Jordan var block_td_uid_4_5a5eecf4bb070 = new tdBlock(); = "td_uid_4_5a5eecf4bb070"; block_td_uid_4_5a5eecf4bb070.atts = '{"limit":3,"sort":"","post_ids":"","tag_slug":"","autors_id":"","installed_post_types":"","category_id":"","category_ids":"","custom_title":"","custom_url":"","show_child_cat":"","sub_cat_ajax":"","ajax_pagination":"next_prev","header_color":"","header_text_color":"","ajax_pagination_infinite_stop":"","td_column_number":3,"td_ajax_preloading":"","td_ajax_filter_type":"td_custom_related","td_ajax_filter_ids":"","td_filter_default_txt":"All","color_preset":"","border_top":"","class":"td_uid_4_5a5eecf4bb070_rand","el_class":"","offset":"","css":"","tdc_css":"","tdc_css_class":"td_uid_4_5a5eecf4bb070_rand","live_filter":"cur_post_same_categories","live_filter_cur_post_id":98087,"live_filter_cur_post_author":"2992"}'; block_td_uid_4_5a5eecf4bb070.td_column_number = "3"; block_td_uid_4_5a5eecf4bb070.block_type = "td_block_related_posts"; block_td_uid_4_5a5eecf4bb070.post_count = "3"; block_td_uid_4_5a5eecf4bb070.found_posts = "3825"; block_td_uid_4_5a5eecf4bb070.header_color = ""; block_td_uid_4_5a5eecf4bb070.ajax_pagination_infinite_stop = ""; block_td_uid_4_5a5eecf4bb070.max_num_pages = "1275"; tdBlocksArray.push(block_td_uid_4_5a5eecf4bb070); RELATED ARTICLESMORE FROM AUTHOR Latest News Ginsburg buys 207-unit Mohegan Lake rental complex for $54 million Fairfield National real estate broker Redfin enters Fairfield County market Economic Development Sloop Brewing to relocate to iPark on former IBM East Fishkill site LEAVE A REPLY Cancel reply Please enter your comment! 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January 16, 2018 Ginsburg buys 207-unit Mohegan Lake rental complex for $54 million January 16, 2018 Westchester judge finds doctor’s noncompete agreement too restrictive January 16, 2018 Norwegian Air to end international flights from Bradley Airport January 16, 2018 National real estate broker Redfin enters Fairfield County market January 16, 2018

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