New Census Report Is Good News for Commerical Real Estate

Well the U.S. Census Bureaus’ latest construction spending report sends good news to CRE investors. The news is certainly encouraging to the construction industry, but also to new multi-family housing and commercial REIT investors.

In their latest report, private spending on commercial construction is up 1.2% over last month. As a whole we’re going to focus on that good news and not think about the fact that number also means a 5.1% decrease in spending from May last year.

We all know that multifamily housing is going to be in demand due at least to the fact that over 4.5 million home owners were foreclosed on since the recession began. And the census report shows it- construction for lodging is up 2.8% since last month. This seems to indicate there may not be enough rental units to house everyone in the future. I think we’ve noticed an uptick in apartments locally, like the renovation of the apartment buildings between Abercorn and Habersham near Habersham Village. Dawson Long, owner of The Chelsea at Five Points, also says vacancies are way down.

The slow increase in construction spending hasn’t gone unnoticed by major corporate investors, either. Michael Cembalest, JP Morgan’s CIO of Global Wealth Management, as reported by Business Insider, says that “there’s less new construction to impede a recovery, and prices have been marked down to reflect a new era of cautious underwriting.” And after suffering billions in losses in the CRE market, he’s recommending that people invest in commercial real estate. That goes for REITs as well as physical property. Chaster Johnson, CEO of CharlesFund, says REITs are a very hot topic among his investors. Cembalest sums up the situation: “The new realities of the commercial property markets have finally arrived; while they are painful for existing (pre-crisis) holders, they are more promising for new ones.”

Note: I am not a statistician and these statistics are reported by the Charleston Regional Business Journal.

A. Joseph Marshall
Savannah Commercial Real Estate Agent