Reinventing real estate: Conference speakers talk about future trends
- November 4, 2010
High cash flow in corporate America may be the silver lining in the clouds as commercial real estate rebounds from the recession, a bank executive said Thursday. Carlos E. Evans, executive vice president and group head of the Eastern division of Wells Fargo National Commercial Banking, told a gathering of real estate professionals in Williamsburg that there’s great potential for corporations to invest in real estate.
“There’s $2 trillion in cash sitting in bank accounts right now,” he said, during a real estate conference at the Mason School of Business at the College of William & Mary. “They’re chomping at the bit to get going, but they’re just waiting to see a little more direction, a catalyst.”
While Evans said some people might consider Tuesday’s mid-term elections a catalyst (Republicans won enough seats to overturn the Democratic majority in the U.S. House of Representatives), he thinks businesses want to see “conviction on both sides of the aisle that we’re going to do something about the serious problems in this country. We need to dispense with the partisanship …”
About 250 people attended W&M’s inaugural real estate conference titled “Reinventing Real Estate,” which featured several speakers from real estate investment companies. Once companies feel comfortable loosening their purse strings and begin expanding and investing in real estate again, this will help create jobs, Evans said, “and get us going forward again. Many companies are doing well, and they’re generating cash flow.”
Keynote speaker, J. Allen Smith, CEO of Prudential Real Estate Investors, focused on major themes he says will affect the investment market. The New Jersey-based unit he oversees, the real estate investment and advisory business for Prudential Financial Inc., has more than $45 billion in assets under management worldwide, with units in the U.S., Europe, Asia and Latin America.
Smith told the audience that the economic center of the world is shifting to Asia. “By our estimates, 80 percent of the money invested today in real estate is in developed markets and 20 percent is in emerging markets, such as China and India,” he said. In 10 years, Prudential expects that ratio to shift to 60/40; by 2030, the ratio will be 50/50. “Over this period of time, investors will have a deeper, broader playing field, and the way they allocate capital will be different. This will bring huge implications in how we build our business.” Prudential plans to open offices in Beijing and Seoul this year, he added.
The emergence of a global middle class, and the ascendance of a diverse set of large, globally minded investors — many of which are sovereign in character such as the China Investment Corp. or the National Pension System of Korea — will influence real estate investing, because they provide massive sources of wealth at a time when the world needs it, Allen said.
Youguo Liang, managing director of investment research for Prudential Real Estate Investors, shared his list of the top 10 trends in real estate investing. In America, that includes a change in demographics (the population is becoming more diverse and older), sustainability, greater expenditures on health care and larger federal deficits, which if not reined in will reduce economic vitality. “Public debt, as a share of GDP, is a serious concern going forward,” he said.
The conference attracted students, brokers, developers and other real estate professionals. James F. Windley, a commercial real estate appraiser, traveled from Portsmouth to attend and said he wasn’t surprised by what he heard. “No one wants to catch a falling knife,” he said of the commercial real estate market. “People and businesses are waiting for the perception that if you buy a house or an office, that it will be worth more in five years, not less.”