Development

Optimism about the future at real estate finance forum

Uptown construction brings new landscape: Crescent Stonewall Station will include a Whole Foods, 450 apartments, two hotels.
Uptown construction brings new landscape: Crescent Stonewall Station will include a Whole Foods, 450 apartments, two hotels. ogaines@charlotteobserver.com

Jim Clayton made one thing clear from the beginning: He’s not interested in figuring out what “inning” the current commercial real estate boom is in.

There’s been a lot of talk like that lately (including my recent story “Are we in the ninth inning of Charlotte’s real estate boom?”), but Clayton, who is the head of investment strategy and analytics at Cornerstone Real Estate Advisers, doesn’t think that makes sense.

“I’m not going to answer any baseball questions. I don’t care what inning we’re in,” said Clayton, speaking Tuesday at the Urban Land Institute of Charlotte’s annual real estate finance symposium. “We want to talk ourselves into doom and gloom and a recession.”

Clayton pointed out that we’ve been trying to figure out when the real estate boom will go bust for years. He recalled the topic of a talk he gave in 2013: “How long can this upswing last?”

“I do not believe age of a business cycle is an indication of its death,” said Clayton. “Most people in the real estate market have had an amazing five to six years.”

Clayton is certainly an optimist, and he pointed to market fundamentals that he thinks will power this current real estate boom: There’s still plenty of ground to make up in the housing market, with construction not meeting long-term demand. The shift to more urban settings offers plenty of opportunities to rebuild and revitalize older areas and suburbs. And even if millennials delay marriage, home ownership and having kids, they likely will still take those steps in the coming years.

Still, he does expect growth to slow somewhat in the coming years.

“We are not going to grow like we used to. The ’50s, ’60s and ’70s were a unique time,” said Clayton. “That’s all the pessimism I’ve got.”

Even if growth slows, Clayton said, consensus forecasts don’t point to a recession. Even if the rise in commercial real estate prices slows, prices will just be closer to historical norms. And even the most pessimistic apartment vacancy rate projections show more than 90 percent of apartments will be occupied, despite the record surge of new units under construction.

Clayton’s forecast might not be the sexiest, but it could prove level-headed: “Things will continue to chug along.”

Ely Portillo: 704-358-5041, @ESPortillo

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