It’s a simple question with a lot of not-so-simple answers.
At the end of the finance panel Monday at the Jersey City Summit for Real Estate Investment, five finance experts were asked to predict what they would be talking about if they sat on a panel a year from that day.
Here are their answers:
- Jamie Block, partner, Kushner Real Estate Group: The Fed has not, in recent memory, increased interest rates as fast as it has. And, if you’re student of economics, you know that it takes a good 9 to 12 months for the economy as a whole to really feel the effects of the increase in interest rates. So, if you’re talking about a year from now, I think we’re going to start to see the effects of what we’re reading in the newspaper: This crazy node where you’ve got very low unemployment and relatively high interest rates. I think a year from now, we’re going to be feeling the effects of those. And it’s going to be a time that we can’t really predict, because who knows what the Fed is going to do at that point, when they really see inflation plummeting and employment changing on a rapid basis.
- Matt Ascher, principal, Northwestern Mutual Real Estate: Who would have expected a year and a half ago that the rates would go from 3% to almost 6%. Obviously, that has a dramatic impact on any performa, or any development deal. Where do I see rates? I have absolutely no idea. I think the big shoe to drop this year, besides interest rates, was real estate taxes, because, as most of the panel pointed out, having some sort of surety and knowing what your (operating expenses are) going to look like, is really critical to any institution.
- Katie Kennedy, senior vice president, national real estate, Truist Bank: I will maybe pivot toward asset classes. So, obviously through COVID, retail and hospitality were the most challenged in terms of appetite from a lender’s perspective. And, even pre-COVID on retail, just with the Amazon effect, and all that, that we were dealing with. But, I think, 12 months from now, the large regional lender appetite for retail, and, to some extent hospitality, will be tenfold what it is today.
- David Wolfe, managing partner, Skoloff & Wolfe: Interest rates directly impact cap rates. I’m very focused on this question, because I spend my entire time talking to property tax assessors about cap rates. I think the Fed is not done increasing rates, and I think cap rates are going to continue to rise. And that’s just the reality that we’re going to be dealing with, but, as long as the market can anticipate that, they can deal with that. I think we may see a lower level of overall tax on some of the buildings in Jersey City, which would be tremendous. And I’m hoping that we’re sitting here he’s not talking about another big surprise in terms of property tax increase, in terms of the rate. Nothing would make me happier.
- Jose Cruz, senior managing director, capital markets, JLL: I think maybe there will be two surprises: One is the amount of capital of equity that’s out there today that needs to find a home. I’m going to use the word tsunami, because I get the calls that I see the capital being raised, and the amount of money that’s being raised today that needs to be put to work in the market.
Cruz, as is his way, couldn’t help but end with a joke: I keep hearing that real estate brokerage commissions are going to double, he said.