The Emerging Trends in Real Estate report for 2014 by the Urban Land Institute states this will be the year we “recover from the recovery.” Over the past few years, real estate development in much of the country and in South Jersey has been dominated by multifamily development. Now we are beginning to see signs of life in other segments. According to Sam Leone (pictured), VP of development for Conifer Realty, there are several things that are important for a broad-based recovery in South Jersey.
1. Demand. The single family home market in South Jersey has struggled over the past several years. However, the average time on the market is improving, as are the median sales prices and number of new listings. Demand needs to continue to grow and must also be there for commercial, retail and industrial real estate.
2. Business spending and consumer confidence need to improve. While the real estate industry does show some signs of improving demand, many are still pointing to low business and consumer spending as reason for concern. Businesses have largely been holding cash on the sidelines. Meanwhile, the chief economist for the National Association of Realtors recently directed attention to the employment rate, which on a national level has not improved much over the past few years.
3. Broad-based development. Real estate investment needs to expand back into categories and markets that have been largely stagnant the past few years. These sectors represent a broader-based economic recovery, and will also attract broader segments of the investment community.
4. Interest rates. Extraordinarily low interest rates have helped maintain moderate growth. At some point, interest rates will rise. The Fed will eventually make changes to its position on rates, and as the economy recovers, rates will begin to rise. When it happens, the timing and the rate of interest growth need to be in line with growth expectations.
5. Availability of Capital. As the signs of a full recovery begin to materialize, the availability of capital will need to continue to improve and to expand back into real estate sectors where it is needed.
Published (and copyrighted) in South Jersey Biz, Volume 4, Issue 2 (February, 2014).
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