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Takeaways from the Walker Webcast…

Takeaways from the Walker Webcast…

October 22, 2021 12:23 am

Each quarter Willy Walker of Walker & Dunlap interviews Dr. Peter Linneman about his Linneman Letter (a highly regarded “one-stop-shop” quarterly publication for commercial real estate investors, as well as anybody seeking to understand today’s ever-changing economic and geo-political environment).  Here are some takeaways from the most recent October 2021 webcast…

  • It is a great time to buy assets, especially multifamily and industrial. Finance them cheaply, fixed or floating interest rates doesn’t really make a difference, and don’t worry about inflation – CAP rates will compress from here.
  • According to data from ADP,  employment numbers are much better this month compared to the previous two months… and this is despite September being hindered by the Delta variant. From March 2021 to September 6th, 2021, it is estimated that about 3.5 million people who could have joined the workforce stayed unemployed. 
  • Right now we have 8% actual unemployment, which is roughly 13. 5 million people and about 8 million more people than pre-pandemic statistics. Still, even with this level of unemployment, GDP reached $22 trillion, which is about  4 % short of what it would have been if COVID hadn’t happened. 
  • In the next 12 months we can expect to see GDP growth of 4.5 – 6.5%. Job growth will lag GDP growth but it has always lagged GDP in a recovery. This is because employers are hesitant to bring jobs back until there is proof of recovery.
  • In the next 12 months there will be 6 million jobs added  (3.5 million from people returning to work when the benefits are gone and 2.5 million from normal job growth). It will be 1-2 years before things come back fully but right now we are in an extraordinary window of time / growth hampered only a bit by the Delta variant, the percentage of people who are unvaccinated, and by the strain resulting from shutting down the economy.
  • Should we worry about inflation?  Some sectors of the economy are being affected by inflation more than others and Dr. Linneman argues that most of the inflation we are seeing is transitory.  Developers are an example of a sector that is  experiencing a lot of pressure resulting from inflation. Rising costs, shortages of building materials and labor are causing construction delays as well as increased housing prices.  
  • In July,  CPI inflation was 5.4%. Dr. Linneman says that 20% of that inflation increase was due to the price of used cars.  In March, April and May of 2020 there were almost zero cars being rented. In response, the rental companies sold their fleet down to the minimum number of cars needed.  This year GDP is back and the number of cars people are renting and buying is disproportionately high due to pent up demand. A significant proportion of the used car supply comes from cars sold by rental companies and because they sold all their cars last year, the used car supply is very low – driving prices up.  The scenario won’t last and the price of used cars will go back down. Increased prices in the used car market is an example of how the index is being artificially driven up and why the situation is not expected to last. 
  • One sector that is not experiencing transitory inflation is housing.  According to Dr. Linneman, both single family and multifamily housing is fundamentally underproduced and has been for the last 20 years. The current housing shortage is due largely to NIMBYism and the situation will not be remedied until project approval times become shorter. 
  • Will adding 6- 8 million jobs put downward pressure on inflation and wages?  According to Dr. Linneman there will be some stickiness on wages that will result in price increases, which will be a drag on the economy but it won’t create more inflation. This is because the wage increase from $12 – $14 has already occurred.
  • Today, we are over deposited by about $6 trillion dollars.  The US consumer balance sheet is better than it’s been in 40 years and cash deposits by corporations are at staggering record highs. 
  • There will be a significant increase in capital going toward commercial real estate over the next 3-5 years resulting in shrinking CAP rates (most specifically multifamily). 
  • Dr. Linneman and his team looked at data over the last 42 years, across all asset classes, and found that you wouldn’t have lost money by holding any asset for 10 years. They did the same for three year holds and found that depending when and what you bought you might have lost money. The best returns occurred when everything went right and you held for three years.  Time cures most things and that is why coverage is so much more important than LTV. The best performing asset class was multifamily and it also had the best returns. Multifamily has the unique advantage of  having Freddie Mac and Fannie Mae because they deepen the capital pool and create predictability.

 For more information click here to watch the Walker Webcast

Also, for more information about Dr. Peter Linneman and the Linneman Letter – check out his website: www.linnemanassociates.com

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“

Brian and Michelle did an outstanding job selling Bonneville Hot Springs Resort for us. We had requested that our property sale be done in a completely confidential manner so it did not interrupt our daily flow of business. They created beautiful collateral that represented our property very well and kept it current and complete. They made themselves available to tour the property for all interested parties in a non-invasive manner so we could continue to do business without neither guests nor staff being aware of the property being for sale. We would recommend Brian Resendez as a superbly competent realtor to anyone interested in selling their commercial property.

M. S. - Seller

“

I appreciate your service, continued support and marketing effort that you have made on the Redwood Hotel project in Grants Pass, OR. The brochure and marketing information that you have compiled for this property is excellent. I look forward to extending our business relationship.

Don Hayes - Hayes Brokerage, Inc.

“

Very difficult deal – estate (foreign beneficiary) and three buyers. Best way to describe it is:  “Maze”. But we made it. Brian was instrumental in bringing it together.

Roger Reif - Attorney

“

Brian Resendez was my personal broker for the sale of two motels that I sold. One sold in March of 2010 and one sold in March of 2011. In selling these motels he showed great skill and professionalism, which was needed, in order to sell these motels in a down market that exists today. Brian was very aggressive and knowledgeable in getting these motels sold in a timely manner.

Charles C. Hagel - Motel Owner

“

Brian is an outstanding Broker. He is diligent in his service to his clients, and he takes his responsibilities seriously. His connections are very deep in the hospitality industry. Not only does he seem to know everyone, even better, everyone seems to know him. I have won direct business through having Brian introduce me to one of his connections. Now that person is a client our ours as well. Brian is the kind of Broker, and the kind of person, with whom I enjoy doing business.

Mike Grubbe - Business Development Manager at SD Deacon

“

It was a great pleasure and experience to work with Brian for our very first property purchase. At times negotiations with the sellers were challenging, but we always found Brian to be super-responsive, professional, and helpful. His office was prompt to communicate with sellers, follow-up with third parties, put together additional documentation, or dig up information. Anything that was needed to keep the ball rolling- Brian and Michelle were on it. 

We highly recommend their service, and it will be a pleasure for us to work with Brian and his team when we get our next opportunity.

A. A. - Buyer

“

Our experience with Brian Resendez from SVN Hotels was excellent. Brian not only went the extra mile to make sure we got this deal done, he also gave us honest advice. The process from start to finish was one of the smoothest experiences we have had with an acquisition. I hope to have the opportunity work with Brian and his team on future deals. 

S. P. - Buyer

“

After researching and interviewing several leading NW hospitality brokers, it was very clear to us that Brian Resendez was the best choice.  Marketing a partial interest in a unique hospitality property presented an unusually challenging situation for any veteran broker.  Brian’s experience, creativity, hard work, patience and personal care led to a successful outcome for all parties.  We highly recommend Brian Resendez and his capable team.

Jim and Wendy Inkster -

“

We had a vision for our next adventure in hotel ownership and it needed the right person to guide us in acquiring a property that would make our dreams come true. Brian made that happen for us. Brian was a great listener and helped negotiate a sale that was a fit for our unique needs. Brian was responsive and kind – we felt like we were always his top priority!

 

Melanie Prummer, Peace at Home Executive Director - Buyer

“

My experience with Brian Resendez was nothing short of professional. We had a challenging year long transaction and he completely kept me and the process on track and got us all to the finish line. Brian was always a wealth of information above and beyond what was expected.  Thank you Brian!

John Holt - Land Investor

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Beaverton, OR 97005

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