2013 Rocky Mountain Commercial Real Estate Expo Fall Forecast

Howard Lutnick – we are in the brokerage business, I don’t want to be in the business of betting which way the market will go… we are in the business of making sure we can best serving our clients regardless of the market.

He commented that if you’re not serving your clients with 100% effort when you’re working with them… you aren’t working FOR them.

We have years and years of low interest rates. Steady 0.10% overnight interest rates for the foreseeable future. Interest rates become so low that investors start to look into regional markets.

Anything associated with low interest rates is going to do great.

What does he mean by 0 interest rates. Right now the Fed’s objective is to have overnight interest rates between 0.00%-0.25% for 2014 and 2015. It could remain under 1.00% in 2016 and 2017.

Are big banks too big to fail? How does that effect interest rates?
– big banks are fascinating because banks have a very low interest rate (they have possession of our money for nothing). Banks make 400 basis points on $3,000,000,000 in deposits! The Fed can’t get banks to lend to small business because the spreads banks are making between deposits and loans is too high. Coca Cola can borrow at basically nothing and a single “B” company has to borrow in the 6%-12% interest rate. Banks drive the economy so if they fail, you can destroy the economy. The Fed won’t allow banks to fail because of their huge power.

Any areas of concern?
In New York, there is a lot of discussion about the ‘living wage’ which is $15/hour. The problem is that government thinks that government is the solution. Howard has a friend in Greece that coined the major difference between America and Greece… In Greece, working for the government is a great privilege

Mark Rose
Any and every challenge represents an opportunity.
Their company had experienced incredible growth with no debt.
Political uncertainty is holding us back.
Interest rates spiked 30-70 basis points in May due to tapering.
40% of returns in the last 10 years have been due to interest rates decreasing
Interest rates and cap rates are stabilizing but they have only one way to go… UP
Government intervention – prolongs the recovery and holds interest rates down
Business investments stalled during the election
Canadian investment in the US (and Denver is huge)!

35.1% of renters previously owned a home

$1.5 trillion of new apartment buildings will be needed by 2030

Fortune 500 companies moving to Denver

Multifamily in Denver
2013 – extreme renter demand (nearly 3,000,000 in metro Denver) – over 30,000 kids graduate from Metro Denver looking for homes
High end renters will have difficulty buying new condos because of lurking legal issues
4.2% (last year it was 4.8% and year before it was 4.8%)
Average turnover is 50% per year
Average rents are $1.20 for 2Q2013
Downtown the units are smaller so the rent/SF is higher ($2.00)
4.25-4.75% downtown cap rates for institutional development
16,000 units under construction will deliver in next 3 years
90,000 (1950-1970)
43,000 (1970-1994)
55000 (1994-2004)
15000 (2004-Present)

Downtown is main source for development 11,000 units currently and delivering 4,700 units